Seattle Partners withdraw from KeyArena renovation process

Seattle Partners have removed their bid to renovate KeyArena. The partners include AEG and Hudson Pacific Properties, which were competing against Oak View Group for the project.

Author:
KING Staff

Published:
1:14 PM PDT June 5, 2017

Updated:
1:14 PM PDT June 5, 2017

One of two groups that submitted plans for a possible renovation of KeyArena is withdrawing from the process, citing issues with how the city has conducted the process.

Seattle Partners - a group that combined arena giant AEG and Hudson Pacific Properties - announced Sunday it is pulling out of the process after submitting plans in April for a proposed $521 million renovation of KeyArena.

In a letter to Seattle's mayor and city council on Sunday, AEG Facilities President Bob Newman and Hudson Pacific Properties Chief Investment Officer Alex Vouvalides said, "significant factors through the bidding process have eroded our confidence in the ultimate execution of this project, no matter which group is selected."

"We fear the City is driving toward an unrealistic financing structure, and we believe the City has failed to conduct a sufficiently thorough, objective and transparent process to properly evaluate the respective strengths and weaknesses of the two proposals and, most significantly, to identify the proposal best positioned to deliver a project consistent with the community’s interests."

Seattle Partners was one of two groups to submit proposals for renovation of the arena. Oak View Group was the other group to submit a proposal - a $564 million plan - and has appeared to be the favorite in the process.

Seattle City Council member Rob Johnson said his dealings with Seattle Partners had been a “very positive experience” and the letter was a “big surprise, especially considering what they had to say."

Following Sunday's developments, Seattle Mayor Ed Murray said in a written statement:

"We appreciate Seattle Partners' interest in investing in KeyArena and our ongoing partnership with AEG on major events, such as Bumbershoot. Over the last few months, the City and the Community Advisory Panel have undertaken a careful review of the two proposals to redevelop KeyArena into a world-class entertainment facility that will bring the NHL to Seattle and the Sonics back home.

“There are strengths and weaknesses in each proposal, and the City fully expects a robust negotiation upon choosing a preferred alternative, to ensure the final plan meets the needs of the surrounding neighborhoods, the city, Seattle Center and those who will use the building for years to come.

“It is unfortunate Seattle Partners chose to pull their proposal. As recently as May 19th, Seattle Partners stated in a mass email: ‘We applaud the City for executing a thoughtful public process. Engaging with teams from the City and the public has strengthened our proposal and crystalized our approach.’ We hope to continue our current relationship with AEG and look forward to addressing our path forward on KeyArena, as well as our commitment to engage the community, in the coming days."

Tim Leiweke, founder and CEO of the Oak View Group, released the following statement:

"As I have said previously, our project is 100% privately financed and built with 100% private proceeds. With our partners MSG and Live Nation, we have assembled the best team in the sports and entertainment industry. Our chief objective is this: provide the best financial deal for the city, an exemplary public-private partnership, and build Seattle a showcase venue for professional sports, music, and entertainment. While we are still engaged in the RFP process, we have no further comment. We look forward to the mayor’s decision."

Murray has said he expects to speed up the decision on which bid to recommend to council, now by early June. A council committee is charged with reviewing the terms of the bids, in addition to ruling on the SODO arena street vacation request.

Three days before Seattle Partners announced their decision to withdraw from the KeyArena renovation project, Uptown Alliance, which represents the lower Queen Anne neighborhood, publicly released a letter expressing concerns over the proposals.

Read the full letter from AEG to the Seattle mayor and city council:

Dear Mayor Murray and Seattle City Council:

We are writing to inform you that Seattle Partners must regretfully withdraw our bid to redesign and renovate KeyArena.

We remain firm in the belief that our proposal best serves the people of Seattle, but, unfortunately, significant factors through the bidding process have eroded our confidence in the ultimate execution of this project, no matter which group is selected. We fear the City is driving toward an unrealistic financing structure, and we believe the City has failed to conduct a sufficiently thorough, objective and transparent process to properly evaluate the respective strengths and weaknesses of the two proposals and, most significantly, to identify the proposal best positioned to deliver a project consistent with the community’s interests.

The people of Seattle deserve a world-class sports and entertainment venue capable of bringing back NBA and NHL teams. We have engaged earnestly in a process that we had hoped would be relentless in its pursuit of that objective, and we put forward a proposal we believed most certain to deliver a successful completed project that would attract professional basketball and hockey teams.

Notwithstanding our confidence in the merits of our proposal, over the past two months, Seattle Partners has actively sought feedback from community leaders, City staff and members of the City’s Community Advisory Council, and, in response, we have explored improvements to our proposal. However, consistent with a general lack of active engagement through this evaluation process, the City declined to seek improved terms, refusing requests from us and others to call for a “best and final” offer from both bidders. We have seen little indication of the collaborative and iterative process we were told to expect and is typical of such requests for proposals.

In addition, the City’s decision to withhold critical financial portions of Oak View Group’s proposal from the public, while releasing the financial details of our proposal with our full support, raises serious questions about the integrity of the decision-making process and the ability of the public to make a fair and equitable comparison.

Despite the lack of transparency, we are generally familiar with Oak View Group’s proposal, including changes to it that have been conveyed via media accounts and otherwise. Based on our experience, we have strong reservations about whether that proposal can be successfully achieved consistent with the City’s best interests. If the City elects to proceed with that remaining proposal, to protect the public interests of Seattle, it is imperative that you closely and diligently monitor the process to ensure that Oak View Group is held accountable for all elements of what it has very publicly promised to the citizens of Seattle.

Seattle Partners remains deeply committed to this great city, and we thank the countless civic leaders who offered helpful input and partnership on our proposal. We wish the City the best of luck in its pursuit of an arena project that can provide what the region’s passionate sports fans deserve – to see the Sonics and professional hockey return to the Emerald City.

Sincerely,

Bob Newman

President, AEG Facilities

Alex Vouvalides

Chief Investment Officer, Hudson Pacific Properties

KING 5's Liza Javier and Jennifer King and the Associated Press contributed to this report.